From the New York Times:
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February 16, 2008
Taps for HD DVD as Wal-Mart Backs Blu-ray
By MATT RICHTEL and ERIC TAUB
SAN FRANCISCO — HD DVD, the beloved format of Toshiba and three Hollywood studios, died Friday after a brief illness. The cause of death was determined to be the decision by Wal-Mart to stock only high-definition DVDs and players using the Blu-ray format.

There are no funeral plans, but retailers and industry analysts are already writing the obituary for HD DVD.

The announcement by Wal-Mart Stores, the nation’s largest retailer of DVDs, that it would stop selling the discs and machines in June when supplies are depleted comes after decisions this week by Best Buy, the largest electronics retailer, to promote Blu-ray as its preferred format and Netflix, the DVD-rental service, to stock only Blu-ray movies, phasing out HD DVD by the end of this year.

Last year, Target, one of the top sellers of electronics, discontinued selling HD DVD players in its stores, but continued to sell them online.

“The fat lady has sung,” said Rob Enderle, a technology industry analyst in Silicon Valley. “Wal-Mart is the biggest player in the DVD market. If it says HD DVD is done, you can take that as a fact.”

Toshiba executives did not return calls asking for comment. Analysts do not expect the company to take the product off the market but the format war is over. Toshiba had been fighting for more than two years to establish the dominance of the format it developed over Blu-ray, developed by Sony.

The combined weight of the decisions this week, but particularly the heft of Wal-Mart, signals the end of a format war that has confounded and frustrated consumers and that had grown increasingly costly for the consumer electronics industry — from hardware makers and studios to retailers.

Andy Parsons, a spokesman for the Blu-ray Disc Association, an industry trade group, said retailers and movie studios had incentives to resolve the issue quickly because it was costly for them to devote shelf space and technology to two formats. Besides, he noted, many consumers have sat on the sidelines and not purchased either version because they did not want to invest in a technology that could become obsolete.

Thus far, consumers have purchased about one million Blu-ray players, though there are another three million in the market that are integrated into the PlayStation 3 consoles of Sony, said Richard Doherty, research director of Envisioneering, a technology assessment firm. About one million HD DVD players have been sold.

Evenly matched by Blu-ray through 2007, HD DVD experienced a marked reversal in fortune in early January when Warner Brothers studio, a unit of Time Warner, announced it would manufacture and distribute movies only in Blu-ray. With the Warner decision, the Blu-ray coalition controlled around 75 percent of the high-definition content from the major movie and TV studios. The coalition includes Sharp, Panasonic and Philips as well as Walt Disney and 20th Century Fox studios.

Universal, Paramount and the DreamWorks Animation studios still back HD DVD; none of those studios responded to requests for comment Friday.

“It’s pretty clear that retailers consumers trust the most have concluded that the format war is all but over,” Mr. Parsons said. “Toshiba fought a very good battle, but the industry is ready to move on and go with a single format.”

Because movie and entertainment technology has become integrated into a range of consumer electronics, the high-definition movie format war has created unusually wide-ranging alliances. The battle included, for example, video game companies; Microsoft has backed the HD DVD standard and sold a compatible player to accompany its Xbox 360 video game console.

Sony has pushed vigorously for the Blu-ray standard, not just because it is a patent holder of the technology, but also because it has integrated the standard into PlayStation 3. Sony has argued that consumers will gravitate to the PlayStation 3 because of the high-definition movie player.

Any celebration over the victory may be tempered by concerns that the DVD — of any format — may be doomed by electronic delivery of movies over the Internet. The longer HD DVD battled Blu-ray, the more the consumer market has had an opportunity to gravitate to downloading movies. Such a move, coupled with the growth of technology that makes such downloading easier and cheaper, has threatened to cut into the long-term sales of physical movies in the DVD format.

Mr. Doherty, like Mr. Parsons, argued that digital downloads are not yet affecting the DVD market and that they would not for some time. They said that movie downloads face a host of challenges, chief among them that many consumers have insufficient bandwidth to download movies or move them from device to device on a wireless home network.

Mr. Enderle, however, argued that bandwidth was improving and that major telecommunications carriers, which are pushing to increase speeds, would like to be able to make their pipes the delivery mechanism for high-definition movies. Wal-Mart, Warner Brothers, Best Buy and all the others lining up behind Blu-ray realized they had to kill HD DVD — and fast, he said.

“The later it gets, the much worse it gets,” he said.

By contrast, Mr. Parsons said that downloading movies “is not a viable option now or even in the near future.”